The Business Community criticised second time upward revision in discount rates in a row by the State Bank of Pakistan (SBP) in monetary policy. This is the second increase during the last two months, previously in September the SBP revised the discount rate 50 basis point and to 9.5 percent. Now on November 13, 2013, it once again revised upward in the interest rate by 50 basis points to 10 percent due to inflationary expectation as announced by SBP.
Former Vice Chairman, Korangi Association of Trade and Industry (KATI) Shahid Jawad Qureshi criticising increase in mark-up rates and said that industrialists already reluctant to borrowing from banks due to prevailing economic conditions and law and order. Lack of borrowing by private sector from banks indicates the severe problems in industrialisation and investment process.
He expressed that high mark-up rates is one of the biggest hurdle in the way of investment in the country. He said it was better if SBP keep the prevailing interest rate unshed. Efforts should be made to strengthen Pak rupee. He said on one hand Pak rupee losing its value against dollar and on the other hand imports increasing which may create serious problems in future.
He said that the mark-up rates are very high in Pakistan as compared to other countries in the world and demanded that its should be brought in single digit. He called upon the governor SBP to reduce interest rates and bring down the interest rate to an acceptable level so that industry wheel keeps rolling otherwise closing of units would result in massive unemployment.
The President Lasbela Chamber of Commerce and Industry, Ismail Sattar has strongly opposed the increase in 50 basis points in discount rate by the State Bank of Pakistan in its Monetary Policy announced by Governor SBP Yasin Anwar. In a statement he said SBP despite spelling out gloomy picture of the economy and declining trend of all major indicators, has increased the interest rate by half point and bringing it back to double digit which is contrary to the facts and an act to further push the economy into muddle. He said that the ailing industry is already suffering and battling for its survival the further increase in discount rate would result into closure of a lot more industries thus mounting the non-performing loans to a new high. He said that all over the world the interest rates are declining and in some countries it has gone to even zero level while remains very low in the region including India, China, Sri Lanka, Bangladesh and other countries.
He pointed out that private sector borrowing remains still very low as banks prefer lending to the government and a hike in the key policy rate would amount to punish the masses, as well as the private sector as they would have to pay more interest on borrowings.
Moreover, it has hit investors' confidence and eroded the ability of the government and private sector to spend on development, which has stalled national progress. The increase in the policy rate is negative for entire textile sector and other industries and earnings of leveraged companies and for the overall economic revival that was expected after the induction of business PML-N government.
Ismail said government should not destroy the industrial sector as non-performing loans (NPLs) are mounting uncontrollably. While demanding of the government to bring discount rate down to around 8 percent as all indicators and financial experts have termed the mark-up increase as disastrous to the economy, he added.
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